Kunal Bahl, ENG’06, W’06, Snapdeal – Failure, Focus and Family!
10 January, 2019
category: Entrepreneur, Joseph Wharton Dinner
Kunal Bahl, ENG’06, W’06, is Co-Founder and CEO of Snapdeal, an e-commerce company based in New Delhi. Kunal embraces three principles for business that he learned through his life experiences: failure, focus and family.
Kunal persevered through failures many times and kept coming out a winner. After finishing high school, he failed to get admission into one of India’s top colleges. Kunal felt disappointed, as did his extended family, who gathered to commiserate. This, of course, led him to Wharton and the incredible journey that followed.
On graduating from Wharton, Kunal went to work for Microsoft, but failed to obtain a work visa while there. So, he packed his bags and headed back to India, eventually setting up Snapdeal, which employed thousands in India. Kunal’s forced departure from the U.S. was actually lamented by Microsoft CEO Satya Nadella in his book.
In India, Kunal reached out to his best friend, Rohit, who was working at Capital One, and convinced him to co-found a coupon company, Snapdeal. Their initial efforts at printing coupons failed, so they pivoted to SMS-based coupons, which also did not fare well. They then pivoted to a discount card, which failed. Finally, in early 2010, Snapdeal began a Groupon concept and grew it to the largest player in that market within eight months. This rapid success caught the attention of venture capital firms and enabled Snapdeal to receive growth funding.
How did Snapdeal become an online shopping site?
Rohit and I realized that the Groupon market was limited in India, so we visited China. We saw Alibaba selling physical products. Within a month, we returned to India and, a month later, shut down the coupon part of the business. At that time, in 2013, as we began to bring sellers and buyers together, we had only one month of cash remaining. Fortunately, we were able to secure $1 million in funding. Thereafter, eBay invested $100 million, the Singapore Sovereign Wealth Fund put in $100 million, and finally, Softbank put in $650 million.
What drove investors to Snapdeal?
As mentioned, we had begun to demonstrate traction with sellers and buyers. We also had an excellent management team, and investors were confident that this was a team worth backing. It also helped that, globally, investors were waking up to opportunities in India.
In 2014, we began a concerted growth spurt, acquiring companies and aggressively growing our top line.
In e-commerce, top line is defined as gross merchandise value (GMV), the total value of merchandise sold on the platform over a given period of time. Growing GMV is a high cash burn option, with competitive discounts leading to massive losses for platforms. That is how the e-commerce market started in the initial years, and everybody was scaling up in this manner.
At Snapdeal also, we were in this high-spend, high-growth mode for a while. However, observing the dynamics, we could assess that this growth was neither real nor sustainable. We became wiser, and by the end of 2015, we recalibrated to a strategy aimed at reducing expenditure and driving sustainable growth.
Then investors saw an opportunity of a merger?
Just as our team coalesced around our vision and strategy of net margin-centric organic growth, a new challenge arose in terms of executing a merger. A lot of energy and time went into this protracted merger discussion that didn’t lead anywhere. I could talk many hours about this, but there were discordant views from shareholders to board members. About six months into the process, it became clear that efforts to drive a merger were crumbling under the weight of irreconcilable differences. It was a painful and precarious period because cash reserves at Snapdeal were draining rapidly.
At the end of 2017, we got together and said, “Let’s either merge or not in the next two weeks!”
We committed to re-energize, divest noncore assets and focus. The result was Snapdeal 2.0.
What are the principles of Snapdeal 2.0?
Our goals were that Snapdeal must:
• Single-mindedly focus on our core business — running a pure-play marketplace.
• Divest non-core assets quickly. Move away from operating multiple businesses, each with their competitive pressures and resource requirements.
• Return to our roots of catering to value-conscious buyers, our most loyal consumers over the years.
• Continuously improve the experience for our buyers and sellers.
• Ensure everyone in the team is aligned to the company’s plans.
• Commit immediately to reach positive cash flow.
What did you learn about focusing?
Today, most Indian e-commerce companies sell their own goods and their own private labels. Snapdeal chose not to own one piece of inventory. It is strictly a platform for sellers and buyers in India to come together. We do not want to compete with our sellers — nor do we ship our seller’s inventory. There was no marginal advantage to run that logistics company by ourselves. Early in 2018, we found a good home for our logistics company, Vulcan Express. We are still its largest customer, but it is owned by someone else. This brought us closer to our aim of focusing on the marketplace. In hindsight, we spent more time on solving logistics-related issues than building a marketplace — our primary business. While one could argue that owning a captive logistics setup would help us compete, it became clear that opening new fronts as a business adds complexity, with an inevitable dilution of focus.
Every company goes through this cycle of starting with a strong core, solving a real problem for people — it succeeds and then becomes exuberant. The company believes it can solve other problems, and believes this and that are also interesting. So it hires new division heads.
The CEO then becomes a project manager over multiple projects — spreading thin — spending insufficient time on each business. We want to spend 100% of time on one business.
There is a story of Bill Gates, Sr. meeting both Bill Gates and Warren Buffet. He gave them each a piece of paper and asked them, “Write the one thing that made you both successful.” They both wrote, “Focus.”
But I found that you have to get scraped at the elbows — to learn these lessons well.
Finally, you realize that you are better off growing one successful profitable business than having a constellation of businesses that are losing money, are not leaders in what they do, and do not have any structural advantage over other market players. I guess everyone has to learn their own lessons.
Every day at work requires us to be sharp with our execution, and mindful with our decisions to start or stop initiatives. We can’t afford to do too much, and at the same time, we can’t afford to do too little. It’s that delicate balance that we need to strike every day as we build the company, while ensuring that we are catering to the needs of our buyers and sellers to the best of our abilities.
Focus also means having the confidence to say no — we have learned to do that as a company. It’s the things you don’t choose that make you who you are. This is now one of our biggest strengths and is now deeply assimilated in our culture.
Why do entrepreneurs need to keep learning this lesson?
There can be exuberance around the market opportunities. Logistics is also important, and payments are also important — so why can’t we …? What you don’t realize in the end is that every great company first got one business right. Grow it before embarking on a new adventure.
What was your experience at Penn?
It was a tremendous experience for me. I had never spoken with a non-Indian person in my life before I came to Penn. I was a very shy child, but after coming to Penn and gaining encouragement, I overcame my diffidence. I began the Wharton Indian Students Association in the undergraduate level. I also fundraised money for underprivileged children in my country.
My classmates had already been active in these kinds of activities before arriving at Penn. But in an Indian high school, doing things outside the classroom was not actively encouraged. Indian schools are primarily about studying and making sure you succeed. That’s what we value, because India is a survivalistic society. Making sure your child gets a good job is parents’ No. 1 priority. There is no social safety net. If you fall, you fall hard. So, at Penn, more than my academic work, the other activities were where my development happened.
You’ve written that you gained much from Wharton’s entrepreneurship program.
I wanted to do something entrepreneurial, because my dad runs a manufacturing business. The Wharton Entrepreneurial Program (WEP) was incredible! Every Thursday, you could sit with an entrepreneur and talk about anything you wanted. As a 20-year- old, how are you going to have the chance to ask questions to groundbreaking founders like Josh Kopelman, W’93?
Inspired by WEP, I helped to organize the Wharton Business Plan competition. I could work with investors, MBAs, jury members and participants. I could learn so much from their perspectives. Then, somehow, I became a teaching assistant for an MBA class.
Doing all these things definitely helped me start my company. When you run an organization where everyone is a volunteer, such as the Wharton Indian Students Association, you learn how to galvanize people, how to work toward a common cause. How do you get people to be consistent and perform what they sign up for when they have classes and many other commitments? Then you gain skills at a subliminal level to galvanize people when you are running a company.
Before Penn, I had never stood up in front of more than five people. Today, I regularly speak before hundreds of team members or conference attendees.
What is your focus outside the business?
My wife and I had two children in the past two years. My mentors taught me to never compromise time with kids. Of course, the family cares about the business, but they care more about me as a person. If you don’t have that, you don’t have anything.
When I arrive home, my daughter knows I’m there, and I can forget about any type of problem. There is no better stress buster than the love of your family.
Would you say that family focus is culturally a part of India?
Both Rohit and I are family-centric. We rarely spend time at industry conferences. We really enjoy spending time at work, but we both also enjoy time with our family.
We have both minimized social activities outside the family. It’s near zero for both of us. But, I think we are in the minority. Often, executives feel a quest to move forward, that if they spend more time at work, they’ll succeed. The general feeling is that, “You can’t fault someone for working hard.”
What is your advice for fellow alumni?
At the bottom of the abyss, what you need to muster is the grit and courage to continue. That spirit to keep moving ahead — resolute and steady — is liberating and energizing at the same time.
Kunal Bahl is Co-Founder and CEO of Snapdeal.com, India’s online marketplace. Its mission is to create lifechanging experiences by providing a platform for sellers of 35 million products (from India and the world) to come together with buyers.
With millions of customers and 300,000 sellers, Snapdeal is the shopping destination for inter- net users across the country, delivering to more than 6,000 cities and towns in India. In its journey till now, Snapdeal has partnered with several global marquee investors such as Softbank, Alibaba, Foxconn, BlackRock, Temasek, eBay, Sequoia Capital and Intel Capital, among others.
Kunal is an engineer from the University of Pennsylvania, with a business degree from The Wharton School. He was named The Economic Times Entrepreneur of the Year 2015, which is the most prestigious entrepreneurship award in India. He was also featured in the 2014 Fortune Global 40 under 40 list. Kunal has been a recipient of many other distinguished awards, including the Prime Minister’s Award for Contribution to the Digital Industry.
In his personal life, Kunal is keenly interested in travel, food, adventure, sports and politics.
By Kent Trabing